Importing rice: Needed, rational production incentives.

After being a major supplier in the global rice trade for over two decades, India is likely to import rice, as local production is expected to fall by at least 10 million tonnes in the current kharif season following drought early in the monsoon season and now floods in the south. The government would do well to assess the situation quickly and facilitate imports.

Large, sudden demand could cause international prices to spike given the smallish global trade in rice. In fact, even as we continue to seek protection for our farmers at the WTO, the country needs to be more flexible in its approach to export/import of farm goods to protect the interests of local consumers and producers. Our ad-hocism and delayed response cause us to pay an unduly high price for imports and export at a loss.

The crux of the problem is the complete politicisation of the concept of minimum support price (MSP) and its use to address multiple goals — price stability, adequate returns to farmers and food security — that are often at odds with one another. The MSP needs to be seen and established as the base price to prevent farm distress that the government will offer if farmers fail to get even that from the market.

This price should take into account all costs and a reasonable mark up. The government should procure grain for the public distribution system (PDS) and the buffer stock from the open market or even import. Such delinking of procurement prices from MSP would protect farmers in the event of a glut but allow the market to function under normal circumstances. It would also address the issue of ever-rising MSP for wheat and rice discouraging production of other crops.

However, over a longer time frame the country needs to seriously address the issue of farm sector productivity. Given the large domestic consumption, we cannot be too dependent on imports. Our surplus in rice is already declining rapidly following tepid production growth. Investment in irrigation, linking the hinterland to markets to improve returns and greater availability of finance and risk mitigation solutions are the obvious challenges that need to be tackled. Finding funds is not difficult if we can find the courage to do away with wasteful subsidies.